WASHINGTON – The Bush administration will include mortgage aid for homeowners and strong congressional oversight in its $700 billion financial bailout plan, the head of the House Financial Services Committee said Monday.
Rep. Barney Frank, D-Mass., said great progress has been made in talks between lawmakers and President Bush's team on the rescue. Leading the negotiations for the administration is Treasury Secretary Hank Paulson.
A government official with knowledge of the talks said the administration has agreed to create a plan to help prevent foreclosures on mortgages it acquires as part of the bailout.
That had been a big demand for many Democrats, who said they could not support the bill without more help for homeowners risking foreclosure.
Sen. Bill Nelson said he would refuse to vote for a bailout for banks "that caused the problem in the first place and (would) leave the homeowner with the short end of the stick."
"Also, we need more transparency and accountability from Wall Street; and, we need to rein in excessive executive pay that isn’t based on performance," Nelson, D-Fla., said.
Senate Banking Committee Chairman Chris Dodd said Democratic and Republican committee members are discussing the legislation he drafted based on the Treasury Department’s proposal received by Congress over the weekend.
According to Dodd's plan, judges would be permitted to rewrite mortgages to lower bankrupt homeowners' monthly payments. Companies that unloaded their bad assets on the government would have to limit their executives' pay packages and agree to revoke any bonuses awarded based on bogus claims.
Dodd would also give the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
But it would end the program at the end of next year, instead of creating the two-year-long initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.
Among the demands of Democrats, many are looking for additional provisions to help homeowners more and Wall Street less.
"It's a little hard to say you can't consider LIHEAP (low income heating assistance) when you can afford $700 billion (for the Treasury)," Frank said.
Senate Majority Leader Harry Reid said he is holding out the possibility of a second stimulus package being attached to the administration plan. Reid said one way or another, a son of stimulus must get a vote, despite Frank earlier in the day ruling out piggy-backing the two.
Even as lawmakers pledged to work with Paulson, calling him reliable and the man to lead the bailout, Democrats vilified the Treasury bill, which was only three pages long and gave the administration brought authority to buy and sell whatever it wanted without oversight.
Frank said the Paulson proposals "gave the administration much too much authority."
"We have to use the federal government's power here," he said, adding that Wall Street's systemic failure reaffirmed his view that regulation must be improved.
"The endangered species act apparently does not apply to financial institutions," he said. "The market is so depressed out there that there is very little real value out there."
Wall Street didn't seem comforted by developments despite the rapidity of movement on Capitol Hill. The Dow Jones industrial average fell almost 400 points during the day and credit markets remained nervous. Oil prices rose briefly by $25 a barrel, indicating uncertainty about the availability and value of the dollar.
Investors were uncertain just how successful the administration's plan will be in unfreezing credit markets, which many businesses depend on to fund day-to-day operations, and for propping up the still-weak housing market.
Conservative Republicans are among the biggest critics of the bailout and said they are unwilling to let the deal get done without a deep breath. Members of the most-conservative bloc of Republicans in the House — the Republican Study Committee — scheduled an emergency meeting late in the day to draft an alternative to the Republican leadership bill as well as proposed amendments tailored to water down Paulson's plan.
Rep. Mike Pence told FOX News he saw no reason to rush into a plan that had been properly evaluated.
"Don't accept it. Don't believe it. Whether I'm in Washington, DC or a used car lot. Anytime somebody tells me I've got to do the deal now, it usually means they're going to get the better part of deal," said Pence, R-Ind.
"I understand that our financial markets are in turmoil and the president was right to call for decisive action. But nationalizing every bad mortgage in America is not the right answer," he said.
Frank said the financial rescue package may not be completed wait until the end of the week or could even bleed into next week.
"I hope we're done by Friday. But we could be fine on (next) Tuesday," he said.
Earlier in the day, President Bush warned Congress that "the world is watching" and it should move rapidly to open up markets. Asked whether Bush needed to be more out front on this, Frank responded, "Frankly I don't think that would pass the bill."
FOX News' Trish Turner and Chad Pergram and The Associated Press contributed to this report.